Twelve Changes Likely to Affect CRE in 2014, by Newmark Grubb Knight Frank
Every new year brings a fresh slate of accounting, legal and tax changes. Corporate tax modifications, new government regulations and amended laws may save or cost companies massive amounts of money. According to Newmark Grubb Knight Frank’s “12 Changes Likely Affecting Commercial Real Estate in 2014,” this year brings the following dozen notable changes:
- Lease Accounting Standards. The Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) Revised Exposure Draft, which would enable greater transparency in how tenants record leases on balance sheets, will likely be approved early in 2014.
- Terrorism Risk Insurance. If the Terrorism Risk Insurance Act (TRIA) “is not renewed before it expires at year-end, liquidity may dry up, hampering the commercial real estate capital markets milieu.”
- “Freeze the Footprint.” Every federal government agency now must develop and submit to the United States General Services Administration (GSA) an annual evaluation of its compliance with a mandate to freeze its physical footprint.
- Dodd-Frank Wall Street Reform and Consumer Protection Act. While experts are not sure what impacts new rules will have on the commercial real estate market, those rules are stiffening banks’ ability to lend, “so REITs, hedge funds and private equity firms are experiencing growing market share.”
- IRS Tangible Property Regulations. New Internal Revenue Service regulations that went into effect on Jan. 1 “govern the treatment of expenditures incurred in acquiring, producing or improving tangible assets.”
- Foreign Investment in Real Property Act. If enacted, proposed changes to FIRPTA likely will “prompt additional foreign investment in U.S. real estate.”
- Production Tax Credit. The renewable energy PTC expired on Dec. 31, 2013.
- The 3.8 Percent Investment Income Tax. The impacts of this tax, used to help finance health care reform, went into effect on Jan. 1, 2013, and will be felt when individuals file 2014 Form 1040 tax returns. (See “Real Estate Investors Face New Investment Income Tax.”)
- Foreign Account Tax Compliance Act. New provisions within FATCA, which requires foreign financial institutions (including real estate funds and REITS) to provide information on accounts held or controlled by U.S. taxpayers, will take effect on July 1.
- Marketplace Fairness Act. Likely to be passed in 2014, this act will require all online retailers with sales of at least $1 million outside of states where they have physical operations to collect sales taxes, regardless of where they are headquartered.
- Simplified Option for Home Office Deduction. Beginning in tax year 2013 (for returns filed in 2014), taxpayers may claim $5 per square foot for up to 300 square feet, rather than computing the actual expenses of a home office.
- Historic Rehabilitation Tax Credits. At the end of last year, the IRS “outlined a safe harbor for partnerships connecting syndications of HTCs,” effective for credit allocations beginning on and after Dec. 30, 2013.
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